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Clear hurdles for Roth 401(k) rollovers

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in Centerpiece,Small Business Tax,Small Business Tax Deduction Strategies

Roth nest eggThe latest “newfangled” retirement plan being pushed by the IRS is the Roth 401(k) plan. Typically, a company will add the Roth feature to an existing traditional 401(k) plan.

Alert: The IRS has issued new guidance on in-plan Roth 401(k) rollovers. (Notice 2013-74) It is intended to encourage more 401(k) plan participants to make the move in the wake of the American Taxpayer Relief Act of 2012 (ATRA).

A designated Roth 401(k) provides the same lure of tax-free payouts as a Roth IRA, but at a current tax cost.

Here’s the whole story: As with a Roth IRA, qualified distributions from a designated Roth 401(k) account in existence at least five years are 100% federal-income-tax-free. Qualified distributions include those made after age 59½, due to death or disability or to pay first-time home buyer expenses (up to a lifetime limit of $10,000). Conversely, regular 401(k) distributions are taxed at ordinary income rates, which can ...(register to read more)

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{ 1 commentsῂ read them below or add one }

Randall Reese February 21, 2014 at 1:14 pm

Clarification…please confirm that the option to take a withdrawal from your designated Roth 401(k) as a first time home buyer is a qualified distribution…I know it is from a Roth IRA…thanx!

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